Understanding Ponzi Schemes
A Ponzi scheme is an illegal investment scam where funds from new investors are used to pay returns to earlier investors. The scheme relies on a continuous influx of new capital to sustain the illusion of legitimacy.
Key Characteristics of Ponzi Schemes
These scams promise high returns with little or no risk and prioritize rewarding existing investors over actual investment strategies or business performance. Eventually, the scheme collapses when it can no longer attract new investors or when many investors try to withdraw their funds.
Historical Background
The term
Related Terms: investment scam, financial fraud, Charles Ponzi, illegal schemes, pyramid schemes.
